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Author John Borthwick

My old friend Don Burton has started blogging. His focus is early stage child development — specifically as it relates to his third child, Whitney. Week by week Raising Whit is becoming a wonderful resource for parents who think about applying some of the more advanced areas of developmental psychology to raising their child — he catalogues development stages and types of play with video’s. Don has spent 20 years thinking and working in this area — he is smart as can be and very passionate about his work/play. Great to see theory in application — up close, very real and personal.

The week before last I packed up my office and formally ended my tenure as CEO of Fotolog. I will miss Fotolog and the team, we had an amazing and exhilarating year, what follows is a handful of thoughts on what mattered, what didn't and what I learnt running Fotolog.

#What we accomplished In the space of 12 months we took Fotolog's membership from 5.8 Million members to 14 Million, we grew engagement in terms of time on the site and features, we moved up into the top tier of Alexa's and Comscore's rankings (Alexa ranked us as #13 worldwide last week ), we turned the site into a business and we completed a sale to one Europe's largest advertising and micropayment networks. It was a busy year. When I think about how we accomplished this — the first and last thought I have on the subject are the people.

AdamS AdamL AndrewC AndrewL Andrey Angelo Anna Brian Cynthia Dan Danielle Elke Frank Jason Joseph Linh Luis Mathias Meghan Melissa Michael Olu Rachel Rodrigo Scott Thomas Tom Toshimitsu Warren 'n' Yossi made it happen, it was a privilege to work with you all. The team grew through the year — we lost some and we added a handful — and we figured out how to work as a team, how to set and deliver priorities. When I came on board the company was in a position that was on one hand typical of a start up and on the other unusual. The typical included a somewhat overwhelming list of things to get done with few agreed upon ways to prioritize or assess what should get done when and why. The unusual included the fact that Fotolog was a small team running a hugely popular web site with an audience that was predominantly international. The first job was about prioritization and focussing on scaling the site and reducing latency. We worked to establish a common set of priorities and then establish a process to execute against those priorities. We then shifted attention to monetization, cleaned up some odd contracts, tested partnering with some exotic non US companies and then drove monetization with the ad networks, and the partnership we struck with Google. We worked through up's and downs: outages, breaking 10M member threshold, a membership strike, massive growth in Europe, drowned servers, visits from the FBI, and a good deal of member love. Throughout getting the team to work together as a team was I think our biggest accomplishment — our successes flowed from that. My thanks.

#Active angel, advisor, board member, get a job… My relationship with Fotolog started as an angel investor in 2003. Then in late 2006 Scott Heiferman, Fotolog co-founder and board member, raised the possibility of my coming on board as CEO. I had known Fotolog as an investor for years — but coming in as CEO offered a wholly different perspective of the operational challenges. Thorough the experience, I learnt that you can be as active as you want as an investor, be an advisor, sit on the board, help with product or business development but you wont really have a clear idea about what's going on within a company unless you actually work at the company. You need to be in the flow of everyday decisions, you need to understand workflow, process and — most evidently what are the real challenges a company faces — not the one's they think or you think they face. The lesson here as an early stage investor is to balance the time you spend with companies — it's tempting to think you can help solve operating issues from the outside — but unless you are willing to jump in and take a job much of your backseat driving is as useful as backseat driving.

#Balancing capital raises with audience growth and monetization One of the things the Fotolog team did right since the first day the site was launched was managing the cost base of the company in a way that was appropriate to the audience, monetization and funding. At no point did the Adam, Fotolog's co-founder, misjudge the balance between these drivers. This is hard to do particularly if VC's are offering funding based primarily on audience metrics. There are sites who have audiences growth comparable to Fotolog with 4x or more the headcount. In 2008, I think, striking this balance will be as important as ever — in particular re: businesses who are building audience on the back of platforms like Facebook or Twitter — eg: indirect vs. a direct (non mediated) form end user interaction.

#Fresh matters There is a tremendous amount of value that accrues to coming into a situation fresh and seeing things without the encumbrances or assumptions you inevitably make after been in a role for a while. The Fotolog team had all the answers to the paths we ended up taking there right in front of them, it is just hard to see those paths after you have been in a role for a while. Keeping perspective is always hard to do in life, and the formation pain of becoming an entrepreneur makes it especially hard. Back at AOL, a long time back, Steve Case and Ted Leonsis used to talk about periodically firing one another — in order to keep perspective. The lesson here is that as an entrepreneur you need to flip between fervent passionate belief in your ideas and objective reassessment of your position — those perspectives usually sit at either end of a spectrum — making that flip is hard to do, very hard. Sometimes an outsider can help, sometimes getting away helps. In Fotolog's case, Adam Seifer, gets credit for making those flips. Adam and I had known each other for a long time — going back to the mid/late 90's and six degrees / Total New York — as a co-founder of Fotolog he was open to re-invention and an objective assessment of what we were doing right and what we weren't. Hard to do, not always easy, but necessary.

#Positioning matters When I started at Fotolog one of the early set of discussions we had was about positioning — what is Fotolog? what does the brand represent to our members and what is the relationship our members have to the experience? Fotolog had for a long time been considered as an international version of Flickr. Yet when we looked at the usage data it was radically different to Flickr. Yesterday, to take a random data point — 6% of all the people who ever signed up to Fotolog uploaded a photo to the site, thats a degree of engagement beyond Flickr and many other photo sites (870k pictures, one picture per member, 13.9M members — translates into 6.3% of the total membership). Last month comscore tracked Fotolog users as spending 26 min on the site, per day, Flickr's numbers are less than a quarter of that number. By digging into usage data we concluded that the Fotolog experience was social, social media. Understanding this helped us orientate our positioning for our members, our advertisers and ourselves. The rituals associated with digital images are slowly taking form — and operating from within the perspective of a mature analog market (aka the US) tends to disort one's view of what how digital imagery is going to be used online. The web as a distinct medium is developing indigenous means of interactions. We figured out the positioning, summarized it in a short phrase (share you world with the world), put together a banner with 1.. 3 steps to get going on Fotolog and got to work. Clear positioning helped us, and helped our partners figure out what we were and what we weren't.

#Scalling, speed matters Fotolog is a huge bazaar of user generated content, displayed on a small number of page layouts. The importance of rendering those pages as fast as possible cant be understated. It's always easy to put more things on a page but rendering a page quickly and giving the user what they came for has to remain the top priority. As we go into 2008 Fotolog has steamed passed the 150M daily pageview threshold, we are heading towards 5BN monthly pageviews, we now have more than 350M photos that we host, guest book messages per photo now average almost 12, an increase of more than 30% over the past year, and Alexa ranked us at #10 in the world last wednesday, #10?!@ (the average for last week was 13). This past Christmas period saw records of uploads, pageviews, November to December saw month over month growth of over 10% — a big shift since in past years the holidays have been downtimes for our membership. Its hard to determine what has changed, I think its a combination of the relative growth in Europe (where uploads and activity has continued to grow through the holidays) and the fact that the internet and Fotolog are becoming more and more threaded into people's personal lives, and media experiences. Maybe its also a little bit about Florkey — Fotolog continues to make people feel special — its microfame of a form that Warhol could never have anticipated.

#Saying no is hard It is hard for young organizations to say no. No to possible partnerships, no to business development inquires, no to investors who think they understand your business. Yet saying no is what many small companies need to learn how to do. When you are still figuring out what you do and how you make money opening those questions to third parties can either grind you to a halt (partnerships are complicated), distract you into retrofitting a model that your partner understands but may not be right for you or just confuse you. Bob Pittman taught me how easily a mass of small projects that you leave unfinished or undecided can drown out the one's that matter. When I arrived at Fotolog one of the first thing we did was shut down many of the business development conversations the previous CEO had opened up. We might have missed a gem but shutting them down gave us the space to figure out what we needed to do. What we didn't have a chance to do at Fotolog was the automate the business development process. Once you get to a scale and can standardize your contracts along with your API's you can scale partnerships in a manner that doesn't require saying no to partnerships — everything becomes a test and trial.

#Integrating publishing and distribution into a seamless experience Fotolog taught me the power of melding a publishing capability with distribution. This is what Facebook did when they added the news/mini feed — all of a sudden your updates, activity on site was pushed to your friends — its an important lesson that many other user generated content sites could learn from. Media companies often separate these functions — which in turn skews value towards distribution. Social media networks are using a distributed audience to categorize and rank what is valuable and most interesting. Fotolog started doing this over five years ago — the form that Fotolog uses is simple but effective. When you publish a photo it appears on your page and in thumbnail form on all the pages of your friends. Since the average Fotolog user has 51 friends — each photo you publish is distributed through to 51 people, they in turn re-distribute it. Facebook introduced the news and minifeed structure a year and a half ago as a means to drive and distribute information accross the socialmap they were building. In 2007 the newsfeed became such an important part of the service that people are exploring Newsfeed optimization since only an estimated 0.2% of all submitted items get published into the newsfeed. Fotolog's approach was simple but it was and continues to be groundbreaking and in my opinion a core piece of innovation that is now spreading to the web as a whole.

#Working with an investment bank Several people asked me whether it made sense for Fotolog to engage and work with an investment bank. At Fotolog working with a bank, in our case UBS, was necessary. Interest in Fotolog spanned four industry categories (media, internet, cell phone and traditional photo companies) and three geographies (US, Europe and South America) — organizing inquiries from the matrix of companies that fit into these boxes was complicated to say the least. The UBS team did a fantastic job of putting out a broad net and pulling it in quickly to find out where the legitimate inquires were coming from — they worked tirelessly on our behalf. The transaction we ended up doing was technically a sale but it was also part merger, part recap. Fotolog had been through three meaningful rounds of funding and the cap table was more mature than the business was. The business needed both a direct ad sales capability and a micropayment partner in Europe — Hi Media gave us both. UBS worked with us to navigate our options, mindful of the stage of growth the business was in. Key investors — including myself — continue to hold stock in the acquiring company, not because of a lock up (there was none) but because we believe in the combined value.

# Working with an international audience is challenging This shouldn't be the case, for years the leading web companies in the US have talked about international growth, international commitments but in pretty much all cases international audiences are an afterthought for US companies. I think this is a mistake. The web offers means to reach and monetize audience outside of the US in ways that couldn't have been imagined ten years ago. Think about building a US based company that garners one of the larger audiences online that is pretty much all outside of the US and marketing and monetization are all executed within the platform, nothing needs to be local. Its pretty astounding. Looking forward as global GDP growth outpaces US GDP growth (3.9 percent versus 2.2 percent in 2007), as broadband continues to be available faster and cheaper outside of the US as innovation starts to happen outside of the US (vs. replication which is much of what has happened to date) — as all these things begin to come together international growth has to become a meaningful part of US companies growth.

#Google's scale and reach is astounding … Mid summer '07 we signed a deal for Fotolog with Google to add search to the Fotolog's member pages. The deal had many benefits — among them access to search services and greater transparency into Ad Sense — offering greater control over our our inventory. We learnt a lot doing the deal with Google and we learnt a lot executing on the deal. In doing the deal we learnt how far ahead Google is vis its rivals — I cant offer much more detail but when you dig into it their scale and footprint is astounding. In executing the deal we learnt that despite the improvements in transparency that we gained by entering into a direct relationship the Google platform is still hard to manage as a publisher, it's closed or maybe translucent is a better word — you get the impression that you know what is going on and why, but often its an illusion. This is a problem — as CEO I bet our strategy on Google's platform, applying it to our international audience to get us to break-even and beyond without having to scale up and ad sales team. In hindsight Fotolog needs to have a direct ad-sales capability to complement the networks — the Hi-Media deal gives us that capability in one fell swoop. The deal we did compliments our network capability in a way that we would have had to build if we hadn't decided to work with Hi-Media.

#The future of advertising & social media networks … Is still very much in its infancy. Yet there are indications that display advertising matched with technology that offers adequate cross network targeting could un-tap the value of user generated content sites. Targeting and conversion are real challenges for advertising on social media networks — the more engaged the audience, the more fluid the conversations, the less likely that on page targeting is going to work effectively. Yet companies like Lotame and Lookery are starting to use the data inherent in the structure of the social network to improve targeting and relevancy and hopefully conversion. It is early days but I believe there is promise here — so much so that betaworks has invested in both these companies). Let me offer a detailed example. If you look at Fotolog's PC gaming group over one month in 2007 the group received 500k pageviews. Yet it you look at the "virtual group or channel" — if you target gaming ad's to all the people who visited the gaming group in that past month — even when they are on other areas of the site the reach is extended to 100M pageviews. As Andrew Cohen likes to say "pictures of Aunt Edna might not be so easy to monetize but if you know all the places that people have been who are looking at Aunt Edna you might be able to influence and target where they might want to go next". I believe this holds promise.

Looking to 2008 there is much to do at Fotolog. Integration with Hi-Media is done — we started that back in August and completed much of it before we closed — and the fruits of integration are now coming forth. The team at Fotolog is pretty much as it was — Erik-Marie Bion and Andrew Cohen have taken over leadership (Erik Marie in Paris as CEO and Andrew in NY as the GM). Cyril, Emirik, David and the Hi Media team have been a pleasure to work with, truly. And now they have another great asset on their hands, I am excited to see what they and the team here in NY do. Thank you once again — I learnt a lot from you all.

Article about Fotolog member florkey — daughter of Argentina's newly elected President, Cristina Fernandez de Kirchner. Example of a public figure blowing through assumed public / private boundaries — posting intimate and personal pictures rather than what would be expected from a presidential daughter — manicured press handled media.

“… there is no potential for any malicious activity” is what the TLC told NBC after Billy managed to browse around the file system of the PC’s onboard NYC taxi cabs. When will organizations learn that computers attached to the public network are vulnerable.

Finally got a taste of beacon yesterday. I bought a ticket at Fandango and it was posted in my Facebook newsfeed — you can see the image to the left here. No opt-in, no notification on Fandango, no notification from Facebook that beacon was enabled — it wasnt what I expected — if you want to see a play by play of what is meant to happen, its here). I felt there was a violation of commercial trust unlike I had experienced in a while. Yes I get spam, targeted behavioral ad's but this is both more explicit and more of a violation of the compact that I thought I had with Facebook. I find it astounding to think that a site believes it has my permission to gather and use this data on a non aggregated basis. Age, sex, location — thats one thing — but a purchase that is then explicitly broadcasted out to a group of people, some of whom i know, some of whom I wish i knew and some of whom wish they knew me? If I hadn't found beacon blocker to be as easy to setup I would have closed my Facebook account.

What's the context here? The Facebook needs to rapidly figure out how it can earn an operating margin that reflects the way it is scaling its audience growth. They need to do this to justify the valuation that MSFT pegged on the company. And if private equity investors are going to invest they are going to need to see the path to torrid margin growth, and cash flow — even if this investment is purely financial (eg: at a valuation that is discounted to the strategic MSFT round). Facebook is supposedly making money today but there are two important caveats that add up to supposidely. First, most of the money Facebook is making is from an advertising agreement that blends rationale economics with MSFT willingness to pay a premium to Facebook to keep them out of Google's arms — in English — the advertising deal they have isn't market priced, the investment demonstrated that fact. Second, even if the advertising deal was made up of rationale / extensible economics — advertising using a third party network, doesn't have the kind of operating margin that Facebook needs to achieve to support a market cap of $15BN+.

Facebook is in experimentation mode — and beacon needs to be placed in that context. Nine months ago Facebook launched its digital asset business — that was meant to be a high operating margin, revenue stream. Digital assets sales didn't take off. Then came F8. F8 and the platform initiative has been a huge boon to web 2.0 companies looking for distribution — but as yet, it is not a business. Now we have social ad's and beacon. Both are meant to lead Facebook to the promised land of Adsense like operating margins. My guess is that they will fail and Facebook will have to try again. Not to say there is anything wrong with testing radical new approaches to monetization. Its very necessary — and its brave and unusual to see a company of this scale figuring out its business in the public eye. I think Facebook's market position is fascinating — not since Netscape have we seen a company with this scale of audience without a scaled business model to match. But unlike Netscape — Facebook has at least $250M – $500 of capital to invest to figure its business model out. They have taken the VC model and turned it upside down. They have sold strategic alignment for cash and a stub of equity — buying them time to figure out where the business is.

My bet is the beacon backlash will be severe. The service is presumptuous at best, it lacks transparency and its poorly executed (ie: Facebook's web privacy setting states "…you will still be notified on affiliate websites when they send stories to Facebook. You will be able to decline individual stories at that time." This is not what I experienced). And even if they navigate the backlash they will likely be forced to make it an opt'in feature – rather than opt'out. As a feature that you need to opt into beacon will fade — users wont be navigating Facebook's frustratingly translucent privacy settings to turn beacons on. I wonder if Facebook's platform effort might have given them to the idea that they have permission to launch beacon. This would be facinating — they seem to have bought into their own marketing pitch that they are a web wide platform, missing the fact that they are a site and the web is the platform. I dont believe they have users implicit consent to collect and explicitly serve up this data — I certainly haven't. The backlash that is brewing online is, I believe, very different to the backlash they experienced when they launched the newsfeed. Along with users, MoveOn is at the helm — they can marshall resources and attention in Washington and the EU — this is very different to the newsfeed.

But to run out a counter point — what if beacon is accepted — everything else aside is beacon actually gathering useful information? Like Facebook itself, beacon, is gathering chad's of people lives in a manner that is machine readable but of unclear relevancy. Facebook needs to broker partnerships with all the retailers who are make up my commercial relationships — my commercial graph – and like Facebook's social graph aspires to, it needs to map how relevant these relationships are to me. This is where I think the Facebook model is most flawed. When I friend someone on Facebook I have to put them into one of 14 categories representing how we connected. This might represent 14 categories that can then be mapped across the social network but its only a few steps more interesting than Friendsters rating of whether you were a friend or not. Its not how human relationships are mapped. The dynamic nature of human relationships is reduced on Facebook to a narrow, stagnant handful of categories in order for them to be fully accessible and managed by the code base. Dumbing human relationships down so that they can be more effectively managed by machines is problematic. Its almost back to the the cathedral and the bazaar — computer centric experiences vs. human one's. And what about the data — these commercial chads of data — two counter perspectives. I was reading an interview with Craig Venter this weekend. He talked about how the six billion letters of his genome are now mapped but that the only useful conclusion thus far is that he should be taking statin drugs (fat lowering drugs) a conclusion that could be reached with far less data — by simply looking at family history. Are these beacon data points actually representative enough to form a data set that will enable behavioral targeting? In discussing behavioral targeting with the founder of Tacoda last week he explained how second order data was often more predictive of behavior — not first order. I wonder how predictive and useful these data points would be anyway. Over to Twitter — compare a Twitter stream to the Facebook news feed. Facebook's news feed feels like media, its processed, organized and polite. Twitter is messy, its all these tiny little specs of people's lives in a stream of data that offers a surprisingly human feel — Facebook has processed, digested and organized — Twitter is a steady stream of chatter, some of it useful, much of it messy, but all of it very human. Similar story with Fotolog — it has none of the computing cetric categorization that dominates Facebook — the site is messy and hard to navigate if you are a machine, but for humans its seemingly a pleasure — average time on the site is now 25 min per user, per day. These are disctinctly human experiences online — I believe we need to foster these experiences and get machines and code to be smarter about us, not the inverse. There will be more — not less — to come on the subject of beacon. Oh, and btw Beowulf was good — worth seeing in 3D.

Quick post: someone asked me yesterday how Fotolog is doing growth wise in Europe and then Scott sent me this chart. Google trend analysis for search terms Jesus, Real Madrid and Fotolog — as you can see Flog is on somewhat of a tear in Spain. Note flagged news items — F was clearly a driver of traffic, but E? ?

Popularity is driven by a base of active users, not a rich set of cool features.

The web is global and its tail is very long. By courting users outside the US with language and culturally specific design you can compete with the big boys. Some the hardest competition for Google, Yahoo, etc comes from local startups with an ear to what the locals want.· If you want to get a lot of buzz then do what ever alpha geeks want you to do. If you want a lot of happy users do what they want you to do.

Constraints in web sites can, like in poetry, make something unexpectedly better. The rule that users are only allowed to post one photo per day creates an environment where people comment more on each others photos which creates a more engaged community. Who knew? · Protect your website with limits. Limit the size of pictures, comments, etc so your resource usage doesn't grow outrageously.

Have a vision. Have a strong sense of what your site is supposed to be and why, then use that vision to decide what you should build and how you should build it. Their vision of social site built around daily photographs led to a very different site than one where your goal is to store all your photos.

Revenue generation features can be added without destroying the integrity of your site. I really like how they give people a reasonable set of features for free and then charge for the resources they need to have more. Those features also serve to extend and reinforce the social vision of their site. It will be interesting to see how their new monetization strategies play out.

I struggle sometimes to define what I consider to be appropriate personal boundaries re: personal publishing online. As I type, I am flying back from a short trip to London where I went to the memorial service of my 36 year old nephew. What follows is a somewhat rambling post about these boundaries and some memories from the service.

Only connect
After the service yesterday other than sadness all that I could feel was a desire to connect. I called my wife and other family members, I just wanted to share the experience I had had with people I care about. Forester’s words come back and back to me over the years of working with online. As humans we have a deep need for connection — but what are the boundaries of those connections, what tools online serve to effectively share and connect with other human beings?

Online so many of the tools we are building are about public connections, public sharing, public publishing. Friends in the media world often wonder or don’t wonder they just state that people who today are sharing their lives openly on facebook, myspace, beebo, fotolog or any of the long list of other social publishing platforms will stop doing this when they grow up. I don’t believe they will — we are on path to greater and greater public disclosure. This is different to privacy and its certainly different to what people in studies say they want — but usage data is pretty clear, pointing in the direction of ever decreasing concerns about public/private boundaries.

Take Facebook. There has been an incredible explosion of activity on Facebook this year. Much of it is the arrival of the digerati, and many of those people are active bloggers so they fell right into the grove of publishing, posting pictures publicly and updating their newsfeed etc. But many of these new users have never blogged and in discussions with them I have heard them talk about how Facebook is giving them a new platform for sharing in public. But the platform is not new — the internet has offered this kind of sharing for a long time — what is new is they are accepting a new compact in terms of the public / private boundary under which they organize and share their lives using real identity (vs. fantasy which is most of what we see on Myspace, Fotolog etc.). As such Facebook is becoming a platform for identity on the web. New Facebook users are changing behavior, the technology and social context may be easing that change but its the user behavior that is shifting. Slowly, haltingly, people are opening up their lives and participating in virtual communites. It’s a similar but more extreme story over at Twitter.

I regard Twitter through the prism of presence management. Yes, it is a tool for communication and personal publishing, but so many of the posts and the activity on Twitter relate to presence. “I am here right now and its kind of interesting, here is a bit of here”. The shift the designers of Twitter made a few weeks ago — clarifying that friends are named as “followers” only serves to re-inforce this aspect of Twitter. The public / private boundary in Twitter has a couple dimensions to it. Foremost is location. People post and tell you where they are at random points in time. Its not random for the poster, its just somewhat random for the follower. Event happens and are posted when people want them to know something about the place. Its similar to a service in Japan launched years ago called Ima-hima, they did opt in location based posting from mobile devices. I think they are still around, hard to tell from the web site.

Personally, I have few concerns about posting location, heck, last year I played around with publicly posting my location for weeks, hour by hour, via GPS. Its the type of location posting on Twitter that I struggle to navigate. I have no interest in what I call observational broadcasting or egocasting — using Twitter to essentially say “here check my life”. There is a subtle point here I will try to unpack. Egocasting for me feeds two aspects of my relationship to the network that I don’t want to feed — both of these aspects are related let me try to distinguish them clearly. First it serves to increase my awareness of the network about my physical space, encouraging me to observe an experience vs. engage and hope to understand an experience. Second it serves to feed my ego’s need to push or publish that awareness to the public network. I personally, don’t want to develop either of these traits. When I am somewhere I want to try experience where I am, not the experience of what sharing the experience of where I am will be. This might be personal, I know its personally important to me — its somewhat I feel strongly about to ramble on about it here.

Back to London and the memorial service. I wanted to share my experience but I wanted to share it in a direct and personal way with a small group. The tools to do this dont really exist today beyond email. Years ago bullentin boards and communities like the Well or Panix served this need. But today the scope of Facebook or Myspace is insanely broad and as a consequence it lacks the dynamic evolution of human relationships. The designation of friends on many social sites is clumsy and broad — on Facebook I get to shoehorn the type of relationship I have with you into one of 14 categories. And then there is the issue of missing prana that I remember reading about in a piece by Barlow over a decade ago. Friends are not the 150 friends I have on Facebook, friendship is a dynamic human experience and shoehorning it into a set of categories is dehumanizing. The network needs to serve us, not us the network. To the extent possible, I seek to be very intentional about how i interact with the network.

One aspect of the network and the internet that I do want to feed is its capacity to enhance and help us remember. So let me close with the address that was given at the service.

The priests who gave the address at the service was the priest who had married my nephew eight years ago, he was also his god father. His address was very frank and ungarnished with religious dogma. He couldn’t avoid it — he wasn’t just the representative of a religion here he was the god father — he was someone who actually had to resolve how this kind of loss can sustain his belief not undermine it. He spoke very directly about how he resolves belief in God with the loss of someone in their mid-thirties, a husband, a father, who has spent fifteen years struggling with cancer. How do you square that circle? Here I am going to tread with clumsy steps on heaps of theological thinking, but I have asked this question myself, here and before and I haven’t heard many answers, he offered one.

He focussed in on the question of whether he views God as a personal, active God or a passive observer of life. He said that one time that God actively participated was when he gave his son to mankind. That one act aside he said God isn’t an active God. That one act was an act of giving, an act that ended with his son dying at age 33 screaming, “My God, my God, why have you forsaken me”. That act, that intervention in our lives, he said, only served to illustrate that our lives our lived by us, but against a backdrop, of something greater than us.

With mixed emotions – a combination of great excitement and a slight tug at the heartstrings – we announced today the sale of Fotolog to Hi-Media, one of Europe's largest advertising and micro-payment networks. This transaction forms one of Europe’s best positioned Internet companies, with huge audience reach and great monetization tools. Our release lays out key elements of the rationale for this transaction, but here are the high points:

· The opportunity to bring together Fotolog’s rapidly growing audience of more than 10 million members, 15 million visitors – and its top 20 ranking among the world’s most trafficked websites – with Hi-Media’s huge ad-network and great optimization capabilities

· The tools for Fotolog to extend its platform and community services with one of Europe's largest micro-payment networks · The jump-start Fotolog brings to Hi-Media’s Publishing Group

· The strong geographic fit, combining Fotolog's growing strength in European markets like Spain and Italy with the reach Hi-Media will give Fotolog in rich and valuable Internet markets such as France,Germany and Sweden. · The outstanding opportunity the Fotolog team and investors will have to participate in the growth of the combined company.

· And equally important, the matching of two teams of people who know how to run Internet businesses. Cyril Zimmerman and the Hi-Media team have been building one of Europe's foremost online ad networks for more than a decade.

With Adam Seifer, Warren Habib and Scott Heiferman, we have a pedigree that goes back to the earliest days of social networking. The result will be one of the largest publicly traded Internet pure plays in Europe. Without the tangle of cable, DSL or old media properties that so often come with and encumber European online companies, our combined company will be able to focus on the hottest and fastest-growing media segment on the continent, and in some areas, around the world.

Seen from that perspective, it becomes clear why Hi-Media considered Fotolog so valuable and why we considered them the ideal partner, strategically, geographically and philosophically, to accelerate our growth and fully leverage our team and our audience. So those are the deal highlights. Now to some background on both companies, and why they are such a great strategic and geographic fit.

Hi-who?

Hi-Media, based in Paris, is a leading European advertising network and micro-payment aggregation platform listed under HIMD-PA . Hi-Media’s current management team is the same one that started the business ten years ago as an ad network. Over time they added micro-payments to the business and, more recently, a publishing group. The first two businesses are large and growing rapidly – the third is younger but with the acquisition of Fotolog now reaches scale.

We’re encouraged by Hi-Media’s demonstrated ability to grow through successful acquisitions and integration. The micro-payments business (today one of the largest in Europe), the local ad-sales business (today one of the largest in Scandinavia) and their current content business (a leading French gaming site) were all acquisitions. Hi-Media’s geographic center of gravity also gives reason for doing this deal. Hi-Media's roots are European, but they have a growing presence in South America, based out of Brazil.

This represents a great fit given Fotolog's recent growth in Europe, and with the acquisition of Fotolog, the Hi Media South American business should become an even more significant area of growth. Most importantly, Hi-Media is one of a small handful of companies positioned at the epicenter of European internet growth. I have blogged about this before, but broadband penetration today stands at approximately 60MM HH in Europe – and is poised to double in the next 3 years. Overall, Internet penetration in Europe in '07 will surpass 30% — an important number that has in other geographies represented a step function in growth, usage and monetization. Net based advertising, spending and direct micro-payment services are set to grow proportionally even faster, with analysts estimating CAGR's of over 20%.

Finally, macro trends aside – Hi- Media is well positioned to benefit from the growing needs of long-tail publishers to optimize and monetize their customers. The Ad- Network provides a CPM based platform for publishers to advertise through. The micro-payments platform is an aggregation service, one that offers customers the choice of more than 40 payment providers and access to more than 160,000 premium content sites.

Photo-blogging?

Fotolog was created five years ago by Scott Heiferman. Adam Seifer joined him shortly after and, working out of their apartments, the two of them birthed photoblogging … and created a global phenomenon. It’s strange, but here in the US, the rapid growth of the Internet often reduces business to a set of categories, at which point companies tend to retrofit services to fit those categories. Blogging in the US was initially defined as a text-based experience. Moreover, today daily people post photos to Facebook and Myspace – but those sites are defined as social networks – no one would seriously refer to them as a photoblogging platforms. But look at actual usage data.

The primary media types on Facebook are, first text (messages between members of the community) and second, photos. And that’s exactly what we see on Fotolog — where we host close to 300M photos and billions of conversations … all woven together in a complex social network. Myspace is substantially similar. Today, Fotolog is one of the 20 most-trafficked sites in the world, and the simple magic of Scott’s and Adam’s creation is still seducing our members. I first came to the company as an angel investor, and then Scott and Adam asked me to join as CEO late last year. In the space of seven months we have doubled the membership, inked partnerships with AOL, Google and Sun and brought the company close to breakeven. Our audience has grown in Europe such that today we almost 30% of our traffic is coming from Europe — 2.2 of our 15M unique visitors are coming from Spain. In terms of membership growth — last month — Italy, Germany, and France were right behind.

So why do a deal?

While Fotolog has grown at an incredible pace, it’s only now becoming a business. We have expanded our ad revenue base significantly in '07, yet we have done this with a tiny sales team, based in NY. There are limits to what you can do with 25 people based in NY, serving an audience mostly in South America and Europe. We have a worked with the Google team to use their AFC and AFS networks with significant successes – yet for media companies to build large, sustainable businesses, across both established and emerging markets, we have learnt you need to complement the ad networks with direct sales capabilities.

Fotolog needs room to grow … and with access to Hi-Media's ad-network, we will have an instant ad-sales capability in our largest and fastest growing markets. Longer term, I am big believer in the promise of peer-to-peer advertising among our members. Ads are often blunt instruments that fail to offer value to a membership engaged in a dynamic conversation – targeting and metadata only get you so far. Offering our membership the ability to buy and sell real and virtual items is something we are keen to offer at Fotolog, and a necessary capability to that end is access to micro-payment services across our footprint. Allopass, Hi-Media's micro-payment service, could fill that bill. Finally the agreement we struck with Hi-Media is a great return for our investors – many of whom (including me) are opting to hold stock in the combined company.

To close, a personal note …

As I said in the first paragraph, it was with mixed emotions that I recommended to our board that we do this deal. Fotolog is on a tear. Our international audience is coming of age, there is so much promise ahead, and it’s been a lot of fun running and building the company. The company has a group of very dedicated people. Adam's heart and soul is in the community. And since I came on board, we have weathered some fun operational challenges including user strikes, drowned servers, vendors trashing core databases … not to mention and some pretty hairy and exciting product launches.

Adam, Andrew, Warren, Olu, Frank, Elke, Yossi, Rodrigo, Andrew and many others have all pulled together through many a long night to make the company what it is today. I’m well aware that mergers and acquisitions don't always work out the way you hope. But Fotolog is truly poised to take off – and with the right mix from Hi-Media, there is a lot of potential in this merger that I hope we can make real for our membership, our team and our investors.

Alexa needs to start to operate more like a business. They have a huge lead in terms of toolbar based traffic analysis — they might be a standard but the product hasnt evolved much, the toolbar is considered by many to be sypware and there is little to no customer service for publishers. Quantcast and others are building businesses and Alexa is standing still. There are quirks in there system that just need to be sorted out, like doubleclick is #200 or so — they have to be reading iframes and banners wrong to track that ranking. As for our numbers, I know our geo mix is wrong — there should be a way for publishers and users to interface with Alexa. We have settled back down to #16, a three month average of 21 — #11 was fun for a day.

Thursday afternoon, August 2nd: Fotolog operations team sent me the following photo of a shipment of a Sun 6540 disk array. Essentially our new backup system:

The equipment on the bottom was damaged, the boxes were stacked (inspite of Sun stickers saying "do not stack") and the entire package was wet, from what I gather not soaked, just wet.

Backup is important to Fotolog — with 280M photos, billions of guest book messages and a vendor mess up a few weeks ago that corrupted our guestbook database, this wasn't what we needed. But what started as a mess turned into a customer service story from the gods. The Sun team went right to work, through the weekend — by 9.24pm on Monday (2 working days) we had this sorted out and the shipping details for the replacement boxes.

Shortly after getting the picture and alert from my CTO I forwarded it to Jonathan Schwartz at Sun, asked for his help in sorting this mess out. Within hours I got the following note back:

—————————–

From: Jonathan Schwartz .

Date: August 3, 2007 12:30:10 AM EDT

To: John Borthwick .

Subject: Re: Contact info

Instantly – stay tuned.

Let me know if there's anything I can do to help out – we will get this right asap.

Jonathan

—————————–

Instantly is a tall order but by Friday morning things were moving, they moved all weekend and by 9.24pm on Monday we had shipment details for the replacement boxes. Great service, no finger pointing, no discussion of why and who let this happen — the organization and everything I saw was focussed on execution and getting the client (us) the drives.

Communication was excellent the team sent frequent updates and Schwartz checked in periodically to make sure things were on track. I know Schwartz from college days, but we haven't spoken since I left Time Warner — this was essentially an email sent into the dark morass of corporate America, which yielded fantastic results, way better than I could have expected. I dont have the time to cull through the emails but I noted one from Schwartz cc'd a core customer service group email — suggests he has setup a mechanism to respond to issues like this, building processes like this is hard, particularly as you transition a huge business.

I did the betaworks off-site this week. Good discussions, many of which couldn’t run to completion given time and setup constraints. Decided to use an un-conference format, seemed to work fairly well — the topics people wanted to discuss were good, but hard to determine if anything was really concluded on any one topic, sometimes the questions are more informative than answers. We covered many aspect of social media sparing ourselves the overarching discussion defining social media — from reputation systems, trust, to agents to simplicity in design to many a questions about what causes interaction and what interactions matter we covered a lot of ground.

Some of the interesting questions I heard are below, commentary in []’s:

– In five years, when you wake up what will the device you turn first? what will it look like and who will own the data you are looking at? [the last part of this question is particularly interesting, I suspect the answer will be your own data. And many of the tensions emerging today between users vs. content/IP owners, users and content/IP owners vs. search engines and monetization platforms — in general open and transparent systems vs. open vs. closed system will emerge as a central issue]

– Given the personal relationship people have with a phone (vs. a pc) what services will emerge as core? [People are willing to share and store personal data of a very different nature on the phone vs. the pc, interesting when you consider how much time and effort is meant to harmonize data across these end points / devices]

– Think about pagerank as a reputation system? [Someone also referred to pagerank as an agent, which was interesting, we had a good brief discussion about agents, havent done that in a while. Someone also referred to Fred Wilson as primary information agent, agents are complex, maybe we end us the agents]

– Designing for simplicity … how does less become more? [good discussion here re: Fotolog’s one picture a day restriction and what it yields, and how simplicity as an over arching design principle is hard to execute in our medium and why]

– Is the US falling behind Europe and Asia in terms of infrastructure and innovation? [the group had a real rant about broadband deployment, wireless access and restrictions placed on devices by connectivity providers, wireless and wireline. I was surprised at the frustration level — hopefully it will begin to spread to DC, where the effectiveness of US policy vis broadband deployment is still, seemingly , a debate??!]

– What is it going to take to get tech and tech vc’s to enage in what is happening in DC, the incumbents are driving the DC agenda and wild eyed techno-optimism isnt going to save the day?

– Where is your company going to be in 25 years? [Push to think about the long term, beyond the cycle of pumping and selling companies — how can we build sustainable innovation cycles, real innovation that over time, significant time not just a few years or the next turn of the screw]

– How does the advent of people centric interactions and data exchange effect the evolution of the internet? [more than crowdsourcing, which is already becoming a blurred meme, we are seeing the importance of human interaction and human brains to the network, as human intelligence becomes wired into the network does it make us more network dependent or the network more human, both?]

– Why would most people in the world, pretty much all of them have little idea about what we are talking about? [I hear this at many meetings like this, good grounding statement but then we all trudge back into our technosphere’s]

Other findin(.)gs were:

– People care enough about international and GTD as issues to put it on the white board but not enough to participate in a breakout group!

– Introductions always, always, take tooo long

Participants included people from:

Tsumobi
Ideeli
outside.in
Im in like with you
Fotolog
Index/Seed Camp
Tumblr
Divmod
Downfly
Fichey
Center Independent Media Public Square
Meetup
Buzzfeed
Social Media Club
Next New Networks
Time Warner β etaworks team

Just passed 10M member accounts on Fotolog. What a year it has been, some community metrics / data points.

We have almost doubled our membership so far this year

We hit Alexa #17 in the world yesterday (ahead of ebay!), average over the past week is #18, yesterday we were tracking reach of over 2%.

Comscore recently logged us as having 4.5M daily unique visitors on a base of 10M member, and 15M monthly uniques

Over 20% of our pageviews last month were from Europe.

And the adoption of new products has been very strong. When we launched Fotolog Messenger three weeks ago we had 1.5M people try it out in the first 15 hrs. As of Friday we had 3,193,618 members who had enabled the messenger feature, almost a third of everyone, who ever, over the past 5 years opened and used an account with us? ! That's, one engaged membership.

Thank you to our members, thank you to our team in NY and thank you to everyone who helped make this happen — its a privilege to be part of this great social media network. We are figuring out who is member #10M is and do something special. We will also be launching more new features on Fotolog this week than ever before in our history — 10M or not, this was always going to be a big week!